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Boring, But Important LCOEs

(The following article was published in September 2016 and is still relevant today. It is repeated now, with updates, by an associate, while I do not have access to the Internet.)

Levelized cost of electricity (LCOE) is what excites engineers and economists, and bores most other people, but can have profound effects on Americans.

The Energy Information Administration (EIA) publishes LCOEs for various methods of generating electricity, such as for coal and solar, but their estimates are based on today’s conditions, or conditions a few years from now, for building new power plants.

What’s important, is that the LCOEs supplied by the EIA do not reflect the cost of generating electricity from existing power plants. Plants that have already been built.

A new study by the Institute for Energy Research (IER) has calculated the LCOEs for existing power plants and compares them with the LCOEs for new power plants.

These include adjustments for intermittency and capacity factors for wind and solar.

Today, we are scrapping 110,000 MW of existing coal and nuclear power plants before the end of their useful lives, and replacing them with wind and PV solar.

In other words, we are replacing existing power plants that generate low-cost electricity with new power plants that generate expensive electricity, merely because of new regulations and a political effort to cut CO2 emissions.

As explained below, these actions can harm the American economy, which kills jobs.

Here are the LCOEs for existing power plants, by type from the IER study.

Coal-fired: 4 cents per kWh

Natural gas combined cycle (NGCC): 3.4 cents per kWh

Nuclear 2.9 cents per kWh

Hydroelectric: 3.5 cents per kWh

Here are the LCOEs for new wind and PV solar power plants, from the IER study.

Wind 10.4 cents per kWh

PV solar 14.3 cents per kWh

The IER study did not include Concentrating Solar Power (CSP) plants, such as Ivanpah, but CSP LCOEs will be approximately 8 cents greater than for PV solar, based on earlier EIA estimates.

Since it’s doubtful there will be any significant building of new nuclear or hydro power plants, we need only examine coal-fired and NGCC power plants.

It’s obvious that replacing existing power plants before the end of their economic lives, with wind or solar, will increase the cost of electricity for all Americans. The cost of electricity produced by wind and solar is two to three times the cost of generating electricity from existing coal-fired or NGCC power plants.

LCOEs are an abstraction for most Americans, so here is what the higher LCOEs for wind and solar mean for the American economy.

Americans used 3.9 trillion kilowatt hours of electricity in 2015.

If all of this, excluding hydro and existing wind and solar, were generated from new PV solar power plants, where electricity cost 10.9 cents per kWh more than from existing NGCC power plants, it would cost Americans an additional $379 billion each year. For wind, where wind costs 6.4 cents per kWh more than existing coal-fired power plants, it would cost Americans an additional $223 billion each year.

Just as lower gasoline prices helped fuel the American economy, higher costs for electricity will be a drag on the economy.

Imagine the adverse effect on the economy if Americans spentan additional $379 billion for their electricity by using PV solar.

Not only would the average American be paying more for electricity, over $3,000 per household for PV solar, they will also have fewer job opportunities due to the effect of higher energy costs on the economy.

While it’s physically impossible for wind and solar to replace all baseload power generation, the use of wind and solar in place of coal-fired or NGCC power plants increases the cost burden on all Americans. This burden is made even greater if a carbon tax is added to the cost of generating electricity.